We have no thread on the pipeline politics that seem destined to be the focus if and when the trade deal is struck ...

As I understand the pipeline issue ... it's a choice -- do we want to be a captive supplier of oil to the USA, or do we want to be able to participate in world markets?

If we can build pipelines to ocean ports, we can market an important resource and get higher prices. That wasn't so bad, but now the USA is the world's biggest supplier of oil. We are selling our oil into an oversupplied market at a discount.

I say "we", and of course the oil companies would profit most -- but remember how our dollar lost a dime when oil prices dropped? That's how 'we' profit. (If it pisses you off that the oil companies seem favoured, get some money and invest in them. That's how it works, figure it out!)

The other choice discourages investment and has other negative impacts.

Maybe I am wrong. It's just my frame of reference.

Second, we know Harper was working on pipelines in three directions, and that Trudeau cut one of them. They set guidelines, and the improved, privately owned pipeline had complied. Aboriginals were paid off, everything was at a late stage short of closing the deal. And this kicked up. The courts -- again!

Now, they're acting as if work can proceed, like it's all patched up. How does that happen? I thought the decision meant the government has to establish a few more facts and verify some results, and they get a green light. But it would take a year or two.

This is a bit of video on the subject ... it gives a sense of the importance of the project, and the frustration of a professional who works in the field ... 2 minutes.

I have been remiss ... there have been a couple of encouraging developments. There is a sophisticated video -- high-priced videography, professional voice-overs -- explaining the economics of the pipeline, and identifying it as a vital national interest ... doing the work that journalists and politicians should have been doing.

Harper promoted this and patiently waited through the most extensive reviews ever, and never got it done. Trudeau taunted him with the fact that he was the one that would cut the ribbon and reap the electoral rewards. He kissed off the Eastern pipeline in the process.

Now there are signs within the Liberal party, and voiced by the boy PM himself, that they don't know exactly what they're going to do, but they are determined that the pipeline will be built. Now that they bought it, they are committed. Otherwise, it'll turn into the whitest of white elephants. (Trudeau is always at his best when he does what he has to do to avoid looking really bad.)

I think that's a fair summary of where it stands now. This study is probably another way they are embarking on undercutting conservationist concerns.

Quote:

Feds launching review of oil tanker traffic in bid to renew pipeline approval
By The Canadian Press — Sep 21 2018
OTTAWA — The National Energy Board has less than six months to redo its environmental review of the Trans Mountain pipeline expansion, this time taking into account the impact of additional oil tanker traffic off the coast of British Columbia.

Three weeks after the Federal Court of Appeal overturned approval of the expansion project, Natural Resources Minister Amarjeet Sohi says the federal cabinet is giving the NEB 22 weeks to complete a thorough review of the environmental impact of additional oil tankers that would result from the additional flow of diluted bitumen from an expanded pipeline.

"We are confident that this plan will allow us to meet the high standards that Canadians expect when it comes to protecting the environment," Sohi said today.

The review will examine the impact on killer whales of the additional tankers — it's estimated the number of ships will go to about 35 a month from the current five.

Last month the appeal court quashed the NEB and cabinet blessing of the project, citing improper consultation with Indigenous communities and a lack of review of the marine shipping issue. The decision laid out some specific things Canada and the NEB must do if they want the pipeline green-lighted again.

"Obviously this decision was disappointing but by no means insurmountable," Sohi said.

Canada's plans to restart consultations with Indigenous communities will be announced shortly, he added. A source told The Canadian Press recently the government is looking at hiring a retired federal judge to help oversee those consultations with a view to ensuring they follow court-ordered processes exactly this time.

Sohi is also appointing a scientific technical adviser to the NEB review panel to help conduct the oil tanker review.

The expansion project features a second pipeline, roughly parallel to the existing one that runs between Edmonton and Burnaby, B.C. It would triple the total capacity but the new pipeline would carry only diluted bitumen for export to foreign refineries, while the existing one carries a number of products including refined oil and diluted bitumen.

Sohi made the announcement in Halifax, where he is hosting G7 energy ministers today. Their meeting comes after G7 environment ministers discussed issues including climate change earlier in the week.

Environment Minister Catherine McKenna said today the issue of expanding the pipeline was not raised at those meetings. However Canada has been heavily criticized by environment groups for approving the expanded pipeline, which they argue is incompatible with Canada's promise to cut greenhouse gas emissions and help slow global warming.

Prime Minister Justin Trudeau and the cabinet argue Canada needs to continue to develop its resources even as it makes the slow transition to a greener, cleaner energy economy.

Canada issued cabinet approval for the expanded pipeline in 2016 but political opposition — particularly from the new NDP government in British Columbia, which doesn't want the pipeline — spooked investors from Kinder Morgan Canada enough that the company wanted to walk away from the project.

The amount of revenue that Oil has generated for the Federal Government and many Provinces has gone a long way to pay for many of those programs we enjoy.

The trouble with Notley and Trudeau's (historic) positions on oil is they are largely effective when you are in opposition, but impossible to maintain when you are in Government.

We can't "stop" using oil overnight;
Alternative technologies are amongst the most government subsidized in human history and we still aren't there, when we get there I will be over the moon to fill my hovercraft with water, alcohol, horsehair or whatever the tech is at the time, but for the short term we are stuck with tanking up.

With that out of the way;

The Federal Government is in the process of talking tough with our greatest trade partner.

However the Federal Government has by its actions and inaction made us far more reliant on sending goods North than we were five years ago.

Energy East not only allowed for us to have better access to a European Market and assist them as their North Sea oil reserves decreased but also allowed us more freedom to refine our own oil into gasoline while producing Thousands of jobs in Quebec and the Martimes.

Having those in process would have made our negotiation with the US far more creditable than it is on this issue.

Instead we sit back and watch it go south, get refined in the south, and pay more for a full tank of gas in Edmonton than in Oregon.

Do you really think they're talking tuff? As I see it, they're hardly talking at all.

The Canadian Minister of International Trade walked through the airport in Washington DC wearing a t-shirt with slogans on it. Once a week she goes to the office of the US Trade Ambassador, a far lower rank, in his office, so far as I can tell.

Do the Kremlinology.

Franz Kafka wrote a book called The Castle, in which a tutor arrives to teach the prince. He overplays his hand in negotiations. The book is a study of how impersonal bureaucracy wears down an individual who doesn't accept its terms. In the end, the tutor ends up chasing the sleigh of the overseer through the snow, begging ... and hardly anybody pays him any attention. His self-importance has been demolished.

I think of that book whenever I see the rictus grin of Crystia gazing out at me from a screen. It seems to characterize their vain enterprise. But there is no reason that Canada should pay the price.

Canadian Shale Is Hitting The Wall
by Tyler Durden
Tue, 09/25/2018 - 11:01

Authored by Tsvetana Paraskova via Oilprice.com,

Plunging Canadian prices have been depressing oil producers’ realized prices and revenues, even though the U.S. benchmark and the international Brent Crude prices have rallied year to date.

But it’s not only oil sands producers that have been coping with wide price differentials between Canadian crude oil prices and WTI this year.

Canada’s shale drillers have also started to face widening differentials between the Canadian benchmark for light oil delivered at Edmonton and WTI, due to - unsurprisingly - insufficient pipeline infrastructure to transport the light oil to the market.

The Edmonton sweet crude discount to WTI slumped to US$16 a barrel earlier this month - the widest spread since Bloomberg began compiling the data in June 2014.

Not that Western Canadian Select (WCS) - the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta - has been doing any better. The WCS discount to WTI has been more than US$20 this year, and even US$30 at one point.

This resulted in Canada Natural Resources saying in early August that it was allocating capital to lighter oil drilling and is curtailing heavy oil production as the price of Canadian heavy oil tumbled to a nearly five-year-low relative to the U.S. benchmark price.

Higher oil prices this year have encouraged more Canadian light tight oil and condensate drilling and production, but takeaway capacity - the weakest link of Canada’s oil industry - is maxed and has already started to affect the realized prices of shale drillers, similar to the widening discount for Midland crude from the Permian in the United States.

To be sure, Canadian shale producers are still making money, even with a wider discount, because WTI is now at $70 a barrel, analysts tell Bloomberg.

Yet, signs have begun to emerge that a glut has started to pile up, as shale and condensate production has been growing when pipeline infrastructure has not.

Combined condensate production in Alberta and British Columbia has surged from around 170,000 bpd in early 2014 to nearly 400,000 bpd in March and 366,000 bpd in May 2018, according to Bloomberg estimates based on National Energy Board (NEB) data.

Yet, shale and condensate drillers expect that the wider Canadian light oil discount to be temporary, Tom Whalen, CEO at the Petroleum Services Association of Canada, told Bloomberg.

Although light oil and condensate prices are currently depressed, due to the infrastructure constraints, analysts see one upside for the Canadian oil industry from the wider light oil discounts.

While the wide price differential for Canada’s heavy oil has prevented oil sands producers from taking full advantage of the international and U.S. WTI oil price increase over the past year, low Canadian condensate prices is helping their finances a bit, because they pay lower prices for the condensate to dilute the bitumen they produce.

Oil sands production has created a market for 500,000 bpd of condensate necessary to dilute the bitumen, Kevin Birn, director on the North American crude oil markets team at IHS Markit, told Bloomberg.

A large part of that condensate currently comes from imports of U.S. condensates. According to Birn, the idea that Canadian condensate could overtake imports from the United States wasn’t considered in the past.

“If it’s a battle for market share, it’s going to come down to U.S. imports being pulled back,” Birn said.

Canadian condensates may end up helping oil sands producers with cheaper domestic dilutents, but the widened price differential for Edmonton light crude highlights the key factor that has plagued Canadian oil prices this year and that will likely shape the fate of Canada’s industry over the next five years - not enough pipelines.
https://www.zerohedge.com/news/2018-09-25/canadian-shale-hitting-wall

OTTAWA — The federal government will not appeal the court decision that tore up cabinet approval for the Trans Mountain pipeline expansion and is appointing former Supreme Court justice Frank Iacobucci to oversee a new round of consultations with Indigenous communities.

Natural Resources Minister Amarjeet Sohi says the government does not intend to start the phase-three Indigenous consultations from the beginning, but will use them to address the weaknesses that led to the Federal Court of Appeal decision in August.

The court found that while the government did spend several months in 2016 meeting with Indigenous communities concerned about the pipeline, those consultations were largely note-taking exercises and the government did not do anything to address the concerns that were raised.

The Trans Mountain pipeline expansion plan to triple capacity of the existing pipeline between Edmonton and Burnaby, B.C., is in limbo while Ottawa attempts to fulfil requirements to consult Indigenous communities and consider the environmental impact the pipeline will have from additional oil tankers off the coast of British Columbia.

Last month, Sohi ordered the National Energy Board to go back and do a better environmental review of the risk of oil spills and the impact on marine life when the number of oil tankers in the Burrard Inlet rises to 35 a month from about five.

Sohi gave the NEB until the end of February to report back on the environmental review, but is not putting a deadline on the Indigenous consultations.

"We believe that meaningful consultation can be undertaken in a focused and efficient manner," he told a news conference today.

"We are not going to put a timeline on these consultations because we feel that it is our duty to faithfully engage with the Indigenous communities to get this right."

Montreal (AFP) - An explosion and fire ripped through Canada's largest refinery Monday, injuring several workers in what its owner called a "major incident."

The blast was believed to be the result of a malfunction in the diesel refining section of the Irving Oil refinery in St John's, New Brunswick, said company executive Kevin Scott.

Officials said all the plant's workers were accounted for after the fire, and four people received hospital treatment for minor injuries.

Images posted on social media networks showed intermittent flames and a column of black smoke rising from the refinery, the country's largest with a production capacity of 300,00 barrels of refined products a day.

Rob Beebe, who lives near the refinery, told Radio Canada he felt his house shake, followed by a blast.

With no immediate relief in sight from a collapse in Canadian oil prices, Alberta oilsands companies are beginning to turn down the taps and produce less oil.

Low prices for Canadian crude are causing a chill throughout the industry — from the oil majors, to the small service companies.

Cenovus announced on Wednesday it would limit its oil output by an unspecified amount, while Canadian Natural Resources followed on Thursday by stating it has already cut production by up to 15,000 barrels per day and could increase that figure to as much as 55,000 this month and in December.

Canadian prices crashed in September because of a backlog of oil in Alberta. The Fort McMurray region has increased production throughout this year, but export pipelines are full and several refineries in the U.S. which process heavy oil from Alberta, have shut down for maintenance in recent months.
https://www.cbc.ca/news/business/oilsands-wcs-wti-cenovus-cnrl-1.4887830
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I am wondering ... is Gerald Butts happy about this situation? Or is he upset?

One of the largest foreign holders of Canadian energy stocks says investors are turning away from the country, frustrated over Prime Minister Justin Trudeau’s failure to get pipelines built to ease a record discount for oil-sands crude.

In a letter to the prime minister, Darren Peers, an analyst and investor at Los Angeles-based Capital Group Cos., warns investors and companies will continue to avoid the Canadian energy sector unless more is done to improve market access.

“Capital Group’s energy investments are increasingly shifting to other jurisdictions and that is likely to continue without strong government action,” Peers wrote in a letter dated Oct. 19. “I hope that your government will be even more proactive in securing market access which will assure the competitiveness of Canadian energy companies.”

Capital Group, which runs about US$1.7 trillion in global assets, has a lot at stake in Canada’s oil patch. The firm holds more than US$30 billion of investments in Canadian companies, and is the largest shareholder of Suncor Energy Inc., Enbridge Inc., Canadian Natural Resources Ltd., and Keyera Corp.

The firm also has significant stakes in other names including TransCanada Corp., Cenovus Energy Inc. and Whitecap Resources Inc., according to data compiled by Bloomberg as of June 30. Peers, a Canadian, says he’s responsible for nearly US$6 billion of investments in Canadian energy companies. He declined to comment beyond the letter.

Vanessa Adams, a spokeswoman for Natural Resources Minister Amarjeet Sohi, said the government will continue to support the energy sector.

“We understand that market access is an essential component to Canadian competitiveness, and that is why we are working hard to expand to non-U.S., global markets," she said.

A Capital Group spokesperson said the letter represents the views of one energy analyst, rather than those of the firm.

Deep Discount

While he lauds efforts by Canadian firms and the government to lower emissions and develop energy assets in a “socially responsible way,” Peers says policymakers need to do more to help drillers get crude to global markets. Canada’s oil trades at a record discount because companies from Kinder Morgan Inc. to TransCanada have been unable to get new pipelines approved.

"Market access is critical to an investment in a Canadian energy company and if that continues to be under threat, global investors will seek opportunities elsewhere and Canadian companies will be further impaired," Peers wrote in the letter. “Increasingly, investors are questioning the merits of investing in Canadian energy and with that, Canadian companies will struggle to access capital, create jobs, develop resources and provide a significant revenue stream for the country.”

Trans Mountain Plan

The Trudeau government has supported some pipeline projects, including Kinder Morgan’s Trans Mountain expansion to ship more oil to the Pacific Coast. Kinder pulled the plug on the project in May amid growing criticism from environmental groups and the British Columbia government. Trudeau was forced to buy out the project, and is now re-doing consultations in a bid to press ahead with it.

“Despite the Canadian government taking over the Trans Mountain pipeline project and showing some resolve, no major pipeline project is yet assured and now Canadian companies are being financially impaired,” the letter states.

The industry’s frustration has mounted after Canadian oil prices plunged to a record US$50-a-barrel discount to the U.S. benchmark last month. Encana Corp.’s founder and former Chief Executive Officer Gwyn Morgan said he’s "saddened" his former company pursued a deal to buy U.S.-based Newfield Exploration Co., blaming Trudeau’s environmental policies.

GMP Capital Inc.’s CEO Harris Fricker, who runs one of Canada’s biggest independent investment banks, said this week the roll-out of legal cannabis is a prime example of how Canada can get things right, while energy shows how the country sometimes gets it wrong.

Gartman Is Shocked By What Is Going On With Canadian Oil
by Tyler Durden
Wed, 11/14/2018 -

Yesterday we remarked that while the pain for US energy traders has been palpable, it is nothing compared to the mass hysteria taking place in Canada, where the price of Western Canada Select oil has collapsed just above $15 as far too much local production remains landlocked, and in desperate search of any buyer.

Today, none other than "world renowned commodity guru" Dennis Gartman - who correctly picked the exact moment to advise his clients to "short this rally" and is still short even as Marko Kolanovic has been repeatedly urging JPM clients to triple down on the S&P where he saw nothing but smooth sailing - picks up on this theme, and in his latest letter to clients expresses his shock at the collapse observed in local prices.

We excerpt from his latest letter below.

Quote:

IF YOU THINK THAT WTI AND/OR BRENT CRUDES ARE CHEAP... then consider for a moment what is happening in Canada these days where Western Canada Select crude (WSC as it is always referred to) trades below $16/barrel or a stunning $43/barrel “discount” to WTI! WCS is a “heavy” crude type with an API of about 20 while WTI is a “light” crude with an API “gravity” rating near 40 and so by definition given the greater difficulty in refining WCS compared to WTI it has always sold at a discount to WTI. It had to; there had been little choice.

Historically... and in this instance we mean the past ten years... WCS has tended to trade on the order of $17- $22/barrel discount to WTI although it fell to nearly a $40/barrel discount back in ‘13 when a massive short covering rally in the crude futures sent prices of WTI and Brent futures soaring. Further, in ‘15 and on into the autumn of last year the discount narrowed toward $15/barrel and remains relatively steady there until early this year.

That narrower discount should have held, for the US refineries were refitting themselves to take on “heavier” crude types coming down from Canada and from the Bakken. Instead, they discount has grown steadily as Canadian bitumen production has increased in anticipation of pipelines being constructed to take that increased production south to the US and/or west to the Vancouver area for export. However, the First Nations groups in western Canada, aligned with the environmentalist groups that protest any and all use of fossil fuels, were able to suspend the pipelines heading west to Vancouver, while environmentalists, farmers and First Nations groups in Canada and the US were able to delay... now seemingly indefinitely... the construction of the Keystone XL pipeline. WCS crude is literally trapped at its production sites, with railroad tankers over-the-road trucks being used to carry WCS southward to the US. Oh, and the environmentalists/farmers/First Nations are opposed to the use of railroads and trucks too for safety and environmental reasons also.

The single judge’s decision last week to delay any further work on the Keystone XL pipeline... construction that had been approved by the Trump Administration... has only served to send WCS to a further, deeper and perhaps semi-permanent, historic discount to WTI. Trucks capable of carrying crude oil are in uncommonly and increasingly short supply thus widening WCS’ discount to WTI, and so too are tanker rail cars. Truck drivers too are in short supply while trains are now being used to take grains from the grain production areas that so dominate the middle of the North American continent to the export facilities on the West Coast, the Gulf of Mexico and even from some of the export facilities here on the East Coast, thus making rail movement of crude more and more expensive and sending WCS’ discount to these historic lows.

WCS is not alone in suffering. Crude produced in the fecund Permian Basin now sells at a wide and widening discount to WTI crude futures for it too suffers from a shortage of pipelines, rail and truck facilities. Last year and earlier this, crude coming out of the Permian Basin tended to sell at $7-$10/barrel discount to nearby WTI futures; that has widened to $20/barrel presently, reflecting higher transmission and/or transportation costs of getting that crude out of the Basin and moving it on the Houston/Galveston/Port Arthur where it can be loaded aboard ships and moved into export trade. Indeed, bids for crude oil at the Houston/Galveston/Port Arthur export facilities are now at large... and growing... premiums to WTI! Crude is needed there and so “Houston” crude is backwardated to WTI futures and those who have fortunately been “Long of Houston/short of Midland” crude in the spot market has made enormous profits; those who’ve been on the other side of trade have lost billions.

This then brings us to the harsh financial realities of Canada and its oil industry for as the spread between WCS crude and WTI futures widens to these historically wide... and we hope eventually remediable... discounts, Canada is losing perhaps $100 million dollars/day in revenues! This has to stop of course, but the decision by lone U.S. district court Judge Brian Morris ... an Obama appointment of course... to deny any further construction on the Keystone XL pipeline has served to suspend further building until at least mid-year next year and thus extended completion of the pipeline until mid-‘20 at the earliest [Ed. Note: Judge Morris might have been appointed by President Obama but from what we have read he is hardly a left-of-center ideologue for he was a celebrated football player for Stanford where he graduated from and then went to law school. He clerked for US Supreme Court Justice Rehnquist, who was hardly a leftist and served for years on the Montana Supreme Court before being raised to the Federal district court there in Montana, writing some of the courts more conservative decisions.].

Who are the winners here... indeed if there are any winners? Perhaps it is Kinder Morgan and TransCanada who both had thrown in the proverbial towels last year on their projects in question that would have carried crude out of Alberta with the former’s to have carried WCS westward to the export facilities in and around Vancouver and with the latter having canceled its proposed pipelines eastward out of Alberta [Ed. Note: In the case of the former Kinder Morgan facility, it was rather famously bought by the Trudeau government forC$4.5 billion, putting that government in opposition to itself! We are left to wonder when Ottawa will actually be forced into selling its participation back to Kinder Morgan... or to some other oil industry company... for half or less than what it paid initially?]. Kinder Morgan and TransCanada... the latter for whom we’ve had the distinct honor and privilege of speaking for several times in the past decade!... knew, apparently, that as in any bad trade the first loss is the cheapest.

In the long run, we have to believe that wiser, better, cooler minds will prevail; that Judge Morris’ decision on the Keystone XL pipeline will be overturned by a higher court; that the eco-radical/First Nation alliances will prove ill-advised and that the pipelines in question will be built and that WCS will return to a far more normal $17-$12/barrel discount to WTI. Indeed, at some point in the long distant future WCS may actually trade to a premium to WTI. But certainly for the next few months and perhaps for the next few years the discount is likely to remain at $25/barrel or more discount. Once again, the facts are the facts.

This is a short (4 minute) video which is an oil industry insider talking about the prospects of solving the logjam ... there's nothing we can do about it, and Scheer won't know how we feel until the poll results come in and his possible responses are run through focus groups ...

This bird actually ran for the leadership of the NDP against Mulcair. He is also out of the unions. I am not as pessimistic, personally. I would think that the solution could be quickly found with the application of a little money. OK, not that little.

But then the problem is getting the aboriginal leaders to make environmental demands as cover for the bribes, on the one hand, and as a 'compromise solution' on the other.

CALGARY — Alberta's finance minister says Ottawa's latest fiscal update shows the federal government doesn't appreciate how badly the price squeeze on western Canadian crude is hurting the Canadian economy.

"It's clear the federal government's not speaking the same economic language of Albertans," Joe Ceci said Wednesday. "Ottawa is living in a different economic planet."

Ceci said he was disappointed the fall economic statement included no actions to help Alberta oil producers narrow the price gap between their product and U.S. light crude — around a staggering $45 a barrel recently.

He said Ottawa has not demonstrated a clear understanding of the economic damage caused by the failure to build new pipelines to coastal waters, enabling exports outside the United States.

"We face a critical time for Canada's energy sector and until our market access issues are addressed, the national economy will continue to forfeit billions to the American economy," Ceci said.

"This update does not address one of the biggest concerns Albertans have — getting fair value for our non-renewable resources."

Last month, Alberta Premier Rachel Notley proposed Ottawa invest in moving oil to market on rail cars as a stop-gap measure to relieve some of the landlocked oil glut until new pipelines come into operation.

Ceci said he would have liked to see a mention of crude-by-rail in the economic statement.

But he said there could be more information on that matter as soon as Thursday, when Prime Minister Justin Trudeau is scheduled to visit Calgary.

"We're busily working to get those numbers together."

Ceci said he is pleased with measures included in the fiscal update to allow manufacturers to write off certain capital costs immediately. It was something Ceci pitched in a letter to his federal counterpart.

"This improves our competitiveness and is a win for Alberta workers and companies," Ceci said. "I'm pleased the federal government listened to our advice and took action."

There will, no doubt, be those who believe that Alberta Premier Rachel Notley finally got her most closely guarded wish on Sunday night when she announced she would cut oil production by 8.7 per cent. That she, as an oilsands-hater, finally dunked the industry in policy molasses, to the delight of her covert environmentalist allies.

At the risk of inviting untold hell into my email inbox, I disagree.

I do not believe that interpretation squares either with her actions or with the successive cross-blows aimed squarely at Alberta over the past three years.

A dramatic oil-price crash. Keystone XL delays. A near trade war with an intransigent British Columbia. Unfavourable federal court rulings. A federal government that killed the Northern Gateway pipeline to score points with progressives.

None of this can fairly be laid at Notley's door.

But all are things she has had to contend with.

Preserve value
It also fails to jibe with the fact that both the Alberta Party and the United Conservative Party concur with Notley's decision that cutting production is the only way to diminish the enormous price differential between world oil and the Alberta equivalent — a dramatic discount that is largely due to a lack of pipeline capacity.

At current levels, oil producers are simply mining too much, leading to an enormous backlog of supply that simply can't get to market. And what happens when the market is glutted with supply?

Well, the price drops.

Albertans are, essentially, paying people to take our oil. And with each barrel dumped, less money finds its way into the provincial treasury.

Just as Peter Lougheed explained in 1980, when he cut production to gain leverage over Central Canada during the National Energy Program, reducing production is the only immediate way to preserve the oil's value for the future.

Eventually, the capacity problem will be solved.

Either the railcars the provincial government has purchased will come online next year, or a new consultation process on the Trans Mountain pipeline extension will finally pass. In time, the differential will decrease. And, as there is no sign that the world will be abandoning oil in the immediate term, there will still be a market for the product whenever we find a way to get to it.

In short, there is some reason for cautious optimism. Cutting production now is a gamble on a better future.

I can take issue with several actions of Notley's government, but this isn't one of them.

A capable, national leader
To cut or not to cut was an impossible choice, each position fraught with potential pitfalls. Notley's decision to preserve the value of the oil is a perfectly sound one.

On the whole, Notley has proven herself a capable national leader during one of the most fraught economic periods of Alberta's recent history.

This has been a centre-left government, sure. She has raised taxes, raised the minimum wage, imposed a carbon tax, and I still do not like the ever-increasing debt ballooning on the government's books.

However, it's difficult to pin this government as radical, regardless of how many times she was seen on camera attending an environmentalist rally before she became premier.

No one argues that this province should try to make itself more dependent on the oil and gas sector. Most acknowledge the need to diversify Alberta's economy. This is an entirely pragmatic position given the uncertain state of play within the energy industry.

The difference between a conservative politician and a left-leaning one is only that they disagree about how to go about diversifying the economy — the former is more inclined to keep taxes low and leave the market to manage itself out.

Rachel Notley, who hails from a long-standing Albertan political family, does not have a vested interest in shuttering the province's primary industry.

It is ludicrous to insinuate that she takes pleasure in seeing so many of its citizens out of work, as elements on the fringe right so often seem to suggest.

The Notley government's actions to date have been explicable and largely grounded in practical realities. Nothing tames an anti-pipeline activist more effectively than putting him in front of the ledger and asking him to figure out how to pay Alberta nurses, doctors and teachers.

If Notley has one glaring failure to her name, it's that she, as an NDP premier, like so many Progressive Conservative governments before her, has been unwilling to do what was necessary to wean the provincial operating budgets from the caprice of oil royalties.

That said, unlike previous PC governments, the economy has given her no room to do so.
A rigged game
By comparison, Prime Minister Justin Trudeau has been playing a rigged game from both ends.

His party has paid lip service to progressives on the pipeline file, undermining, destroying and then re-building a regulatory process that now appears to be so stringent that it's unlikely a new pipeline can ever be built in this country again.

At the same time, the Liberals try to keep the oil and gas sector just barely afloat enough to cover for an economy that looks increasingly chaotic and unstable with every passing plant closure and Trump tweet. This is a government that shuts down Northern Gateway as it buys Trans Mountain.

Trudeau wants to feed the golden goose just enough to keep laying eggs, but not a morsel more.

In the process, the Liberals please no one.

Notley's approval ratings generally spike when she bops Ottawa on the nose, and it's entirely possible that cutting production will similarly help her now. Anything is better than doing nothing. But sometimes the people who make good, popular decisions still lose.

The failure, here, is Ottawa's.

Faith in the wrong people
Yet, if blame can be placed on Notley for one thing, it's this — that she placed her faith in the wrong people.

Her mistake was to trust Trudeau.

And in so doing, she now finds herself alone and without the necessary alliances to succeed. This is in stark contrast to UCP leader Jason Kenney, who now has the clear backing of most conservative leaders at the provincial and federal level.

Senior officials from multiple provinces are predicting a tense and difficult first ministers meeting when premiers gather to discuss the economy and trade with Prime Minister Justin Trudeau in Montreal on Friday.

"You can expect a little dustup. There's no doubt about that," said one provincial source who spoke to CBC News on condition they not be named.

The tensions became obvious during a conference call between the premiers on Tuesday afternoon. According to sources with knowledge of the call, several premiers voiced frustration with the draft federal agenda, which sets aside a significant amount of time to talk about issues important to the federal government and leaves only an hour for the provinces to raise their own priority issues.

"The agenda as presented had the prime minister fitting in a train of his cabinet ministers to lecture the premiers on the topics of his choosing," said a second source from another provincial government, who also spoke on the condition of anonymity.

Agenda tilts toward federal priorities: premiers
The main point of contention in the first ministers' agenda is the plan to give three federal cabinet ministers — Finance Minister Bill Morneau, Environment Minister Catherine McKenna and Intergovernmental Affairs Minister Dominic LeBlanc — two hours and 45 minutes in the middle of the day to lead discussions on trade and competitiveness, climate change and interprovincial trade barriers. The premiers' roundtable which follows is set to run only 60 minutes.

The provinces have been agitating to set aside time at the meeting to talk about the downturn in the oil sector and Bill C-69, which overhauls the process for major project approval in Canada. (Emphasis added.) Critics say C-69 will make it harder to advance large scale energy projects for development.

"Well, I can guarantee you one thing. If the agenda doesn't change, the premiers will change the agenda during the meeting itself," Manitoba Premier Brian Pallister told CBC's Power & Politics today.

"Because there are concerns obviously evident in our oil-producing regions in the country that impact on every other province and that impact on our GDP ... on our ability as Canadians to support each other and our Canadian family. So we need to have those discussions, we need to have them now. And those discussions shouldn't wait."

Alberta Premier Rachel Notley and Saskatchewan Premier Scott Moe sent a letter to Trudeau this week demanding that the "crisis facing the energy industry" be added to the agenda. Other premiers argue it's impossible to have a first ministers meeting about the economy without carving out time to discuss the impact of C-69​.

"There's a fundamental difference between premiers talking to the prime minister about C-69 and having the federal minister stand in front of the premiers and lecture them on C-69," said the second provincial source. "We want to actually have a conversation with the prime minister."

Federal officials insist those core provincial issues can be addressed in the larger conversations. But the premiers want them listed as formal agenda items so they don't end up treated as afterthoughts at the end of the day's discussions.

Provincial sources say they're not very optimistic about the chances of a consensus emerging when the meeting wraps up on Friday. The first provincial source predicted there would be "head-shaking more than handshaking" by the time the leaders leave Montreal.

A draft communique has been circulating between the provincial and federal representatives. Right now, a significant number of premiers are unhappy with it — and the first provincial source suggested that a joint communique at the end of the meeting might not be possible.

Trudeau is running short of allies
The tension in the run-up to the meeting underscores just how much the provincial landscape has changed since Trudeau became prime minister. Since he brought back the practice of regular federal-provincial meetings (his predecessor, Stephen Harper, tended to skip them), Trudeau has seen a string of allies go down to defeat in provincial elections — most notably in Ontario, where Kathleen Wynne has been replaced by Trudeau critic Doug Ford.

Now a clear alliance is developing between a powerful bloc of conservative premiers — Ford in Ontario, Pallister in Manitoba and Scott Moe in Saskatchewan — against Trudeau's carbon-pricing climate plan, which imposes a carbon tax on all three provinces and on New Brunswick.

Blaine Higgs, New Brunswick's new premier, also has vowed to fight the carbon pricing plan. Friday's first minister meeting will be the first attended by Higgs and Quebec Premier ​François ​Legault.

While the formal agenda is set for Friday, the premiers and the prime minister will gather on Thursday night for a private working dinner at a Greek restaurant in Trudeau's riding of Papineau. Instead of the leaders dining privately, each will be allowed to bring a "plus one" in the form of a senior political staffer.
https://www.cbc.ca/news/politics/trudeau-premiers-first-ministers-oilpatch-1.4933667
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